​Is Lagarde’s Beijing card a Trump joker?

Managing director Christine Lagarde says that within the next 10 years the IMF could be headquartered in Beijing rather than Washington. Maybe, writes Brian Caplen, there is a hidden message for the IMF sceptics in the Trump administration.

A battle between a Trump White House and the International Monetary Fund (IMF) appears to be on the cards at some stage. The US undersecretary for international affairs, David Malpass, has previously criticised the institution’s policies for using US taxpayers’ money to fund programmes based on high tax rates and exchange rate weakness that did not, in his view, bring economic growth.

In comment provided for the September issue of The Banker, US treasury secretary Steven Mnuchin said: “The IMF should return to its role of encouraging stability among foreign exchange rates, which is accomplished through sound management of public finances, an independent monetary authority operating with transparency, and a market-oriented regulatory framework.”

But for now all seems to be peaceful between the IMF and the US.

IMF managing director Christine Lagarde told The Banker that relations between the IMF and the new US administration are running smoothly but she also says, with apparent reference to the Trump administration’s decision to withdraw from the Trans-Pacific Partnership (TPP): “Nature does not like a vacuum and wherever you leave a vacuum, somebody is going to fill it.” The somebody in this case being China, which was not originally in the TPP but may now join.

Mr Lagarde said at a Washington event in July that in 10 years' time the IMF’s headquarters could be in Beijing, pointing out that under the IMF’s bylaws the head office should be in the member country with the largest economy. China’s economy is likely to overtake that of the US's by 2030.

But was Ms Lagarde also saying that if the US failed to get behind the IMF others would step in?

It seems more plausible to read those comments as a Trump tease rather than a statement of policy. Surely switching the headquarters of the IMF to China should depend on other criteria than solely economic weight?

For all the talk of the US withdrawing from the global sphere into isolationism, it is hard to make case that China is sitting in the wings as a natural contender to lead the world in fostering open and free markets much less liberal institutions.

A more realistic timeframe for moving the IMF to Beijing is probably 50 to 100 years rather than 10. But if Ms Lagarde manages, through such comments, to focus the attention of the Trump administration away from internal fights and into the wider world of trade so much the better.